Is it normal for an Angel investment to consist of a loan note repayable at exit in exchange for equity?

As in most investing questions, it depends. I have seen many, many variations, but the basic designs are made up of debt instruments and equity instruments, usually with a combination. The decision on how to construct the "deal" is all around risk and yield. The higher the risk, the higher the yield. With a debt instrument, the loan note here, the investor is trying to recover his cash and interest at an exit, for your right to use those funds until that occurs. For consideration of risk and use of their funds, the investor wants equity. It is very common for investors to want a note instead of only a piece of the company. In many cases, conversions can occur at revenue targets, next funding round, etc. In your case, with the loan payout at the exit, it is pretty lenient and that investor is willing to take a lot of risk with you. The faster the investor wants their money back, implies the less risk they are willing to take. Also, in your case, it sounds like the investor wants equity upfront for just setting up the loan note and funds; again, not unreasonable (but it may complicate their tax situation by owning equity outright versus a right to convert later). If you have any other questions, or would like me to review your specific documents and provide advice, please let me know.

Is it a convertible note? It sounds like it is. Convertible notes are structured as loans with the intention of converting to equity. If so this is very common in early stage investments.

It's a much more simple, cheap, and fast way to raise money than traditional ways. Especially in very early-stage startups, valuation is really just some number. Most angel investors are investing in a team and idea -- _maybe_ an MVP. It's very difficult to put a valuation on any of these things that's accurate. A convertible note defers the valuation of the company until later rounds when things have been proved out more.

What you should know?

The two most important things to understand in general are the conversion valuation cap and the conversion discount. Often just referred to as the cap and the discount respectively. There is probably also warrant coverage in there to be aware of.

This sounds like a "Convertible Note" which is fairly common, at least in the US. Here is a good definition: http://startuplawyer.com/startup-law-glossary/convertible-note

I'm not sure how these are typically structured in the UK so you'll definitely want to speak to a local lawyer about it.